Critical Analysis Of The Strategic Issues Faced Starbucks Marketing Essay

Critical summary Of The Strategic Issues Faced Starbucks Marketing EssayThe aim of this project field of study is to critic whollyy analyse the strategic issues being faced by an arranging. The organization chosen for this task is the play along Starbucks, which exit be analysed using pertinent concepts reviewed in the module using appropriate theory and models.The abstract get out hold assessment of the external and internal factors and withal the competitive forces influencing the family Starbucks. This exit be accomplished by the lotion of PESTEL analysis and the ostiarius 5 FORCES model. A combined analysis would be carried kayoed by undertaking a SWOT analysis for the organization. The project report would excessively include analysis of the Starbucks Corp using the ANSOFF Matrix and the BCG Matrix to signify the strategic choices the company needs to farm to counter the strategic issues defined by this report.The report structure would start with a brief foo t to the company Starbucks quest fored by the strategic issues faced by the firm. The issues atomic recite 18 sk and so on before in the report based on the analysis which has been carried out using the above models. After discussing the up-to-the-minute and recent issues facing Starbucks the company analysis would fol pitiful which would be supported with relevant theory and application of suitable models. After completing the industry analysis conclusion and recommendations would be provided for Starbucks to counter the strategic problems.STARBUCKS AN INTRODUCTIONThe Starbucks Company was planted in Seattle in 1971 by Jerry Baldwin, Gordon Bowker and Zev Seigel with a vision to educate Ameri fuck consumers about the fine potableing chocolate drinking experience. In 1987 Howard Schultz took over the Starbucks Group, he wanted to create the Italian espresso bar experience in America by creating a ad hominem relationship between the customers and their hot chocolate bea n tree.Just within a couple of historic period they grew from a small coffee business house to a multi-million dollar sign player in the industry by buying solo the scoop out coffee usable and providing the people with an unmatched store experience. As standing, Starbucks is result one in the speciality coffee industry, with much than 12,000 shops in more than 35 countries.The Starbucks mission statement is To inspire and nurture the human touch sensation one person, one cup and one neighbourhood at a time. Freshly create from raw stuffed coffee is the principal(prenominal) crossway offered by Starbucks along with a nonher(prenominal) drinks which include cold and hot teas, cakes and pastries. The Starbucks coffee comes in a umpteen varieties each possessing a different taste, aroma and flavour.In addition to its broad product offerings, Starbucks has many swords including Starbucks Hear Music, Tazo Tea, Starbucks Entertainment, , Ethos Water, Torrefazione Italia cof fee and Seattles Best cocoa. The successful focussing of all of these fools pulled together constitutes the Starbucks portfolio.Starbucks is also one of the most globally advised corporations in the land.In 2006 Starbucks donated $36.1 million in cash and products, volunteered 383,000 hours in topical anesthetic communities, required growers to use strict environmental guidelines, used 20% re pertlyable button in stores, and actively recycled in almost 80% of stores in US and Canada. Starbucks has established itself as the coffee leader in the world and has done so on a socially and environmentally informed platform.STRATEGIC ISSUES FACING STARBUCKSThe major challenge that Starbucks is dealing with is the current fiscal crisis in the world economy forcing them to call closures of many stores around the world. most other challenge that Starbucks is dealing with is competitors. There atomic number 18 numerous coffee shops all over the world and being able to stand out to fl ummox customers is important. Their main competitors argon Dunkin Donuts, McDonalds, and Nestle in the US and brands like comprisea Coffee and Caff Nero in the UK, the two major commercialises for Starbucks. It is important that for Starbucks to k straight off their competitors and what they are currently doing. in any case Starbuck coffees are priced higher than other market competitors because of Starbucks only purchasing the highest timber coffee beans for their product, thus increasing the price of the drink giving the competitors a cost advantage over Starbucks. in any case Starbucks short marketing strategy on advertising is a hindrance in the business growth opportunities. They prefer to build the brand by promoting the drinks cup-by-cup with customers. The advertizing ends until they drink the coffee, reducing the chances to attract valuable customers.Starbucks also does not stress on distri entirelying their products to supermarket because of being forethoughted with the quality of the coffee if the coffees were packaged into designate card bags.Also the rigorous elaboration strategy followed by Starbucks can yield a toll on the firms brand image. As corporations grow in that fixture can be a tendency to focus too heavily on increasing output and locations, and less focus on quality and brand image. Starbucks needs to stay with its values and ideals that get made it successful.Also Starbucks policy of not franchising can be a cause of concern for the firm. Franchising would allow the company to open many recent stores with less risk, and make considerable profits in doing so. Because of this the firms inquiry and phylogeny costs would decease making use of the franchisee knowledge of the local anaesthetic market in scathe of geographic, , psychographics, demographics, and the local country regulations.STARBUCKS ANALYSISThis part of the report would analyse the working(a) of the business by application of PESTEL analysis, Porter 5 forces, the BCG Matrix, SWOT analysis and the Ansoff Matrix.PESTEL ANALYSISPOLITICALTaxation policyHigh taxes levied on farmers in the bean producing countries, would consequently gain the rate at which Starbuck would buy the coffee beans and any much(prenominal) fluctuations in the gross policy would certainly be passed on to the consumer, who now would handle in to purchase the end item at a higher price.International trade regulations and dutysTrade issues would affect Starbucks flat when merchandise and importing goods. When the government of the trading country imposes a tariff it would not only resulting in an efficiency loss for Starbucks but such large income transfers can also become inconsistent with equity. This extra charge would clear to be borne by the consumers.Government stabilityA win over in government policies has a direct impact on the taxation and legislation framework. Also the countries in political turmoil or elegant war should be considered with g reat caution when considering probable market ventures. fight lawReduction in the licensing and permit costs in coffee bean producing countries would consequently lower production costs for the farmers and any such saving(a) would subsequently pass on to Starbucks when purchasing the raw corporeals and eventually to the customers.ECONOMICInterest ratesHigh interest rates would entertain putting off the institutionalisement and elaborateness plans of Starbucks, which would result in someer earnings for the firm. Low interest rates should have the opposite effect. scotch GrowthIn periods of negative growth, the consumer incomes would fall leaving less available income thus impacting sales for Starbucks.Inflation ratesBusiness costs will rise in times of inflation which would ultimately have to be borne by the consumer.Competitors pricingCompetitive pricing from competitors would impact Starbucks pricing that would occupy down the profit margin as they try to maintain their ma rket share.Ex turn ratesIf the currency value falls in a bean supplying country, Starbucks would get more for the same price, when importing the goods. This saving would be passed to the end consumer.SOCIALPopulation demographicsIdentification of the target creation at which Starbuck needs to aim their products is a significant factor in the business operations. The marketing campaign undertaken would focus accordingly.Coffee is a extravagance product in some ways, so the people with the most add of disposable income should be targeted.Working PopulationA large number of workers in big cities now go out for lunch and meals. Starbucks can cash this to their advantage and promote the shop as a site where people can meet and eat, boosting the sales.LocationA good location which is easily accessible is vital to ensure that the customers visit the shop.TECHNOLOGICALIT developmentStarbucks launched its first-generation e-commerce website in 1998. As a result, scalability and performan ce have improved, and the company now has the tools it needs to profile and target customers, analyse site data, and deliver new features to the market in the shortest time possible. red-hot materials and processesTechnology developments in coffee making machines and the computer systems that Starbucks use to operate their cash registers would enable the mental faculty to work swiftly and efficiently. This results in customers being served quickly thus creating authorization for serving more people in the day.Rate of technological changeTechnology is advancing at an astounding rate. Starbucks will need to invest majorly just to stand their ground in the always expanding and developing market, and also to try to stay ahead of competitors.ENVIRONMENTALPollution problemsStarbucks customers create a lot of waste by disposing off the cup and the contents incorrectly. The material for the cup should be carefully selected to make it as biologically degradable as possible.Planning permiss ionsPlanning permission may not be allow to Starbucks if the construction would harm the environment. The land may be protected.Work brassThere are strict laws in most countries pertaining to waste government activity and non-adherence to these could lead to Starbucks being sanctioned, which would affects them financially and also tarnish the reputation of the brand name.Environmental pressure groupsStarbucks should be aware of the influential and physical great effect of groups such as Friends of the Earth and Greenpeace. Any violation of animal or environmental rights by a company is usually followed by a swift and attention-drawing protest from one of the groups. Brand image and customer bases are often irreconcilably tarnished referable to the actions of these groups.LEGALTrade and product restrictionsStarbucks need to follow the trade laws of the countries where they have established businesses. They must ensure that they are not in violation of any local laws. Certain co untries impose a tariff that has to be paid accordingly when importing or exporting goods and this must be taken into account as well.Employment laws for each one country has different employment laws, like limiting the number of hours a person can work per week, varying levels of minimum wage etc. Starbucks should be aware of such factors when considering business working out.Health and Safety regulationsBy not maintaining high standards they would be liable for damages if found in violation as it is a legal requirement for them to enable that their lag and customers are safe when they are in their stores.Land useStarbucks have to abide by the laws of the expression authorities when constructing shops or altering purchased sites and if found in violation of land rules, it can be panalised by the local authorities.PORTER 5 FORCES ANALYSIS1. COMPETITIVE RIVALRYStarbucks is the leader in retailing and abuseing of specialty coffee in the world. Major competitors include Costa coffe e, Caff Nero, Seattles Best Coffee and secondary coffee providers such as McDonalds, Burger King and Dunkin Donuts. The competition is nowhere near to Starbucks volume of operations and sales. habit of coffee is not dependent on the price of the product but also on the specialisation between each product and some(prenominal) value adding variables such as the quality of customer services, brand, brand reference and image of the company. Hence, Starbucks is not majorly sensitive to movements of other firms in this segment.2. THREAT OF spic-and-span ENTRANTSStarbuck is the world leader in its industry and has controlled access to distribution channels. Starbucks have extreme control over such distribution channels because of shot strict guidelines for the suppliers to follow. Starbucks is also constantly innovating and showing strong product differentiation to hamper the possibility of new entrants.However, the entry barrier for the industry is comparatively low and any big firm where great is not a problem could be a potential entrant. Some of the more current and on-going threats of new entrants include fast aliment chains such as McDonalds, Burger King and Dunkin Donuts which can become a major problem in the near future.3. BARGAINING POWER OF BUYERSA big threat to Starbucks is the absence seizure of switching costs in the speciality coffee industry, customers face no switching costs in switching from Starbucks to Costa Coffee or Caff Nero for a cup of coffee. Also a threat to Starbucks is the ability of customers to brew their own coffee. Starbucks tries to counter this threat by offering the Preferred property Coffee Providers and also provides directions for making the perfect cup of Starbucks coffee at home, the perfect cup of course includes all ingredients which have to be purchased from Starbucks.Also with new entrants and competitors such as McDonalds who claim to offer superior roast coffee of reasonable quality for lower price, thus giving the customers some bargaining power.4. BARGAINING POWER OF SUPPLIERSCoffee is the second largest traded commodity in the world. Central and South America produce majority of coffee traded. Starbucks depends upon both(prenominal) outside brokers and a mutually direct contact with exporters for supply of premium coffee beans.The quality of coffee beans sought by Starbucks is very high, proving to be a potential threat to the company. Only suppliers which meet Starbucks coffee standards are able to supply to the giant company. The supplying industry only has few firms which can deliver the quality giving them considerable bargaining powers.However, Starbucks counters this due to its massive size and being the primary buyer and also because of the brilliance of Starbucks business to any individual supplier as it would account for a large percentage of the total suppliers sales, thus reducing the bargaining power of suppliers.THE THREAT OF SUBSTITUTIONSubstitute products are the produ cts that can pose as a trade-off for the product being offered by a company. In the specialty coffee industry, substitute products can be soft drinks, tea, energy drinks, fruit juices and other caffeinated drinks.Here innovation would play a big role. To counter this Starbucks have given their menus a complete revamp and have differentiated so many of their products which are now part of the main product line. The menu includes mingled teas, hot and cold coffee, baked goods and various confectionary items.The only true direct substitute for specialty coffee would be the basic coffee, which is of lower quality than specialty and as such does not present any threat.BCG MATRIXRELATIVE MARKET SHARE broad(prenominal)INDUSTRYSALESGROWTHRATEHIGHSTARS ( Growth outline )Global storesMarket Penetration and evolutionBackward, Forward or plain IntegrationLOWCASH COWS ( Stability Strategy ) growth Development and DifferentiationDiversificationU.S StoresANSOFF MATRIXPresent ingatheringNew increasePresent MarketMarket PenetrationHotels, Grocery Stores, Businesses, Schools, Airlines and Industries Cafeteria harvesting DevelopmentNew Bold Fresh Lunch Programmes and Salads e.g. fiesta scandalmongering salad, fruit and cheese platterNew MarketMarket DevelopmentOpening of stores all over the world. Expansion strategies into Brazil, Russia, Romania and India.DiversificationMusic CDs, Clothing, Coffee Mugs and other accessories.SWOT ANALYSISSTRENGHTSStrong brand name pear-shaped retail distribution systemQuality productExtensive product listGood supplier relationshipsMassive capital fundingprecious and motivated employeesWEAKNESSESDependence on single source of business/incomePrices relatively higher than competitorsStrong dependence on suppliersMerchandise sales in storesOver reliance on home marketAggressive expansion leading to failureOPPORTUNITIESOverseas business expansionBusiness expansion into untapped U.S. marketsExtension of brand name to new products and business linesProduct range diversification to more food itemsTHREATSStrong competitors with massive capital funding capabilities like McDonalds and Dunkin DonutsEconomic conditions may make consumers unwilling to collapse higher pricesPolitical conditions overseas may limit business expansionU.S. speciality coffee industry approaching saturationRECCOMENDATIONS AND CONCLUSIONStarbucks has to efficaciously pursue a Focus-Based Strategy in conjunction with differentiation and a cost leadership based strategy. universe a lower cost store will increase the difference between Starbucks and provide it with a competitive edge. At present, Starbucks competitors are attempting to specialize in the coffee business, thusly Starbucks must pursue focus strategy to increase its strength.Starbucks must quail their product price by producing a new product of coffee using cheaper beans or can come out with special discounts and promotions to bring down cost, thus increasing sales enabling Starbucks to e nter new low cost markets and increase profitability. Also needs to focus on building alliances in new markets/countries to reduce management focus and benefit from the local and experience curves.Should focus on advertising the brand through earnings services for users to access, do road shows, hand out brochures etc. so that consumers become more aware of the brands strong world-wide presence and brand name. Market penetration and market development will help increase the sales. Access unexplored distribution channels like making available packaged Starbucks coffee for consumers by displaying it nationwide in various devisal and shopping stores and not only Starbucks stores.Starbucks must adopt twin policies of Product Development and Product-Market Diversification to counter the stiff competition in external markets. It is important to understand this in the product development phase as they would need to focus solely on making their existing products better. The company can d emonstrate product and market diversification through research and development coupled with creativity and innovation. Product differentiation has proven an exquisite defence against threats such as bargaining power of buyers. Developing new products will offset such potential risks.A strategy should be formulated to tackle the competition by entering into agreements, long-term contracts, with the food service companies that they are competing against. This way their coffee would be sold at these outlets and they would gain access to new markets and increase sales while diminish competition.Starbucks should continue to be a first mover into markets with new products and ideas. Being a first mover of new products into new international markets will be an excellent way for Starbucks to build customer loyalty and pertain its image as an innovative company.Starbucks should continue to locate their operations in high traffic areas, high visibility areas. The company should continue to take excellent care in picking locations. It is extremely important that Starbucks international stores reflect uniqueness in their location and layout. Having locations in a physical body of locations will ensure large market exposure.